Startup Lessons Learned

Drew Houston @drewhouston

• Cofounder & CEO, Dropbox • Earlier: MIT comp sci („05), started online SAT prep co, engineer @ startups

• Easiest way to share files across computers & with other people • Founded in „07, launched Sep ‟08 • Sequoia & Accel-backed startup in SF • Millions of users, rapidly growing

Some context
• 100,000  many millions of users in 18 months since launch • No advertising spend • Hostile environment: lots of competitors, software download • Mostly done by engineers w/ some guidance but no prior marketing experience

How we applied lean startup principles at Dropbox
(sometimes on purpose, sometimes by accident)

When to Launch?
Paul Graham: Early and often Joel Spolsky: When it doesn‟t completely suck
(avoid “Marimba Phenomenon”)

2006: Dozens and dozens of cloud storage companies

VC: “There are a million cloud storage startups!” Drew: “Do you use any of them?” VC: “No” Drew: “…”

Building a bulletproof, scalable, cross-platform cloud storage architecture is hard

From competitor‟s support forum:

"[product] ended up turning all my Word docs and half my Excel Spreadsheets into 0 byte files. Needless to say, I am not happy."

Learn early, learn often

Dropbox‟s minimum viable product:

3 min screencast on Hacker News (Apr 07): Lots of immediate, high-quality feedback

Simple landing page: capture interest/email address

Private beta launch video  12,000 diggs; beta waiting list jumps from 5,000 to 75,000 in one day (Mar 2008)

What we learned
• Biggest risk: making something no one wants • Not launching  painful, but not learning  fatal • Put something in users hands (doesn‟t have to be code) and get real feedback ASAP • Know where your target audience hangs out & speak to them in an authentic way

When “best practices” aren‟t best

Public launch (Sep 2008): Time to get real

Public launch (Sep 2008): Time to get real

Our Web 2.0 Marketing Plan
• Big launch at TechCrunch50 • Buy some AdWords • Hire, um, a PR firm, or a VP of Marketing, or something

Experiment: Paid search
• Hired experienced SEM & affiliate marketing guy ($$) • Picked out keywords, made landing pages • Hid the free account option for people arriving via paid search, replace with free time-limited trial • Went live in early 2009

Cost per acquisition: $233-$388

Cost per acquisition: $233-$388 For a $99 product. Fail.

Experiments failing left and right
• Problem: Most obvious keywords bidded way up
– Probably by other venture-backed startups

• Problem: Long tail had little volume • Problem: Hiding free option was shady, confusing, buggy • Affiliate program, display ads, etc sucked too • Economics totally broken

But we were still doing well…?
• Reached 1mm users 7 months after launch • Beloved by our community

What we learned
• Lots of pressure (or guilt) to do things the traditional way. But think first principles • Fortunately, we spent almost all our effort on making an elegant, simple product that “just works” and making users happy • And we worked our asses off • And hired the smartest people we knew • “Keep the main thing the main thing”

What we learned
• Mostly ignored (or woefully mishandled):
– hiring non-engineers – mainstream PR – traditional messaging/positioning – deadlines, process, “best practices” – having a “real” website – partnerships/bizdev – having lots of features

• Product-market fit cures many sins of management

Fourteen Months to the Epiphany

Why were conventional techniques failing, yet we were still succeeding?

AdWords wasn‟t the problem
• Nobody wakes up in the morning wishing they didn‟t have to carry a USB drive, email themselves, etc. • Similar things existed, but people weren‟t actively looking for what we were making • Display ads, landing pages ineffective • Search is a way to harvest demand, not create it

Typical Dropbox User
Hears about Dropbox from a friend, blog, etc. and tries it

“I didn‟t realize I needed this”

“It actually works”

Unexpectedly happy  tell friends

Steve Blank & Market Type
•Existing Market •Resegmented Market •New Market
•Marketing tactics for one market type fail horribly in others

New strategy: encourage WOM, viral
• Give users better tools to spread the love • Referral program w/ 2-sided incentive permanently increased signups by 60% (!!)
– Inspired by PayPal $5 signup bonus

• Help from Sean Ellis: Surveys, split tests, landing page/signup flow optimizations, encourage sharing  big wins • Big investment in analytics

Trailing 30 days (Apr 2010) : users sent 2.8 million direct referral invites

• September 2008: 100,000 registered users • January 2010 (15 mos later): 4,000,000 • Mostly from word-of-mouth and viral:
– 35% of daily signups from referral program – 20% from shared folders, other viral features

• Sustained 15-20%+ month-over-month growth since launch

Wrapping up
• Learn early, learn often • Best practices aren‟t always best • Know your market type & how your product fits into your user‟s life

Thank you!
Questions? @drewhouston

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